A professional rugby team

This article was first published in the September 2015 international edition of Accounting and Business magazine.

While the world’s best players prepare for what is expected to be the biggest ever Rugby World Cup (RWC), a report by EY entitled The economic impact of Rugby World Cup 2015 estimates that the tournament in England is set to generate £982m of value to national GDP and £2.2bn of output into the economy.

The last time the tournament was held in Europe was in 2007. When France hosted the event, it produced a total direct economic impact of £800m, with domestic spectator spending adding a further £1.7bn to the French economy. Post-event study estimates found that more than £363m was produced in net additional economic gain to the French economy during the seven-week tournament.

The EY report also predicts that record numbers of international visitors are expected to visit England for the RWC. An estimated 500,000 visitors are expected to contribute up to £869m in direct expenditure
 through travel and accommodation. In comparison, the last tournament held in New Zealand in 2011 saw 133,000 visitors staying for an average 23 nights during the 44-day event, making an overall economic impact of approximately £740m.

The author of the EY report, Peter Arnold, a director at the firm, says: ‘Our forecasts are based on a range of direct, indirect and induced benefits of RWC 2015, from the investment that will be made in infrastructure to the ticket and tax revenues that will be generated. The tournament creates economic activity and employment throughout the supply chain, which can bolster the growth of the host cities as well as the UK.’

In preparation for this year’s tournament, £85m has been invested in infrastructure, including the £76m redevelopment of Twickenham Stadium by the Rugby Football Union (RFU), which will continue to deliver benefits to fans and local communities long after the tournament has finished.

An estimated 41,000 jobs will be supported around the country, including 16,000 employees directly linked to the tournament and 12,000 along the supply chain.

With the tournament being hosted across 13 venues in 11 cities, the economic benefits will be spread around the country. The EY report estimates that in Exeter the tournament will generate economic output of £39m, with £17m added to the local economy. In Newcastle, the tournament is estimated to generate economic output of £93m and, of this, £43m will be added to the local economy.

The former chief executive of England Rugby 2015, Debbie Jevans, says: ‘RWC 2015 is set to create a wide range of economic opportunities across many different sectors. Whether through investment in infrastructure, supporting jobs or generating revenue in fanzones, the economic benefits will be shared around the 11 host cities and beyond.’

Rugby World Cup Limited chairman Bernard Lapasset adds: ‘RWC is one of the world’s biggest and most popular global sporting events that attracts sports and major event fans from around the world for a six-week celebration of rugby and the host nation.

‘The findings of the EY report outline the enormous economic, sporting and social benefits of RWC, reaffirming its low-risk, high-return attractiveness to future host unions and governments and just why the tournament increasingly is great for rugby and great for the host nation.’

The report is in stark contrast to the concern from New Zealand following the 2011 tournament. Steve Tew, chief executive of the New Zealand Rugby Union, claimed at the time that the whole future of the competition was under threat.

Tew revealed that competing at that RWC had cost his union more than £6.6m – a loss it could ill afford at a time when player costs were rising and the world economy was stagnating.

The losses were compounded because for the host nation incoming tours were halted in World Cup year and competing nations were not allowed to have any association with their sponsors for the duration of the tournament.

These revelations preceded the International Rugby Board (IRB) undertaking a review of the financial model of the World Cup the following year. The IRB also undertook a full review of RWC commercial rules and money flows.

Tew was adamant that unless changes were made, the All Blacks would have considered sitting out this year’s tournament. Other nations were also clamouring for change.

However, Lapasset subsequently delivered significant changes that have eased many of the financial problems from 2011. The IRB Council supported an increase in the level of distributions from RWC revenues to international rugby associations across the period between the 2011 and 2015 tournaments.

In addition, by setting the 2015 RWC start date as 18 September, the IRB has also set aside a £10m allocation to lessen any impact the timing may have on the Castrol Edge Rugby Championship and the finances of Australia, New Zealand, South Africa and Argentina. The allocation will be distributed between the four individual unions on the basis of any proven revenue shortfalls they suffer as a result of RWC timing.

Commercial rules

A further significant outcome was the decision by the IRB Council to review and relax the commercial rules of the tournament to change the way commercial partners are associated with the national teams during the tournament. Previously sponsors only had limited visibility during RWC. But changes have seen a move more towards the FIFA World Cup model where the commercial partners of national unions can have association at training, on training kit and on media backdrops.

Earlier this year Rugby World Cup Limited announced that global electronics company Toshiba had remained with the family of official tournament sponsors after successful renegotiations. The announcement extended Toshiba’s association with the event and reconfirmed the global prestige of the event. Toshiba pointed out this tournament was on track to be the most viewed, best attended and most engaged RWC to date. Rising audience numbers also continue to attract and retain sponsors.

Television audiences for the tournament have grown across the world. The inaugural RWC was broadcasted to 17 territories and could have been watched by 200 million people. The 2011 edition had a reach of 207 territories and a potential television audience of four billion.

Rugby World Cup Limited head of commercial, broadcast and marketing Murray Barnett adds: ‘With the expanded reach of RWC, we are working together to reach people wherever and whenever they are watching, talking about or playing rugby.’

The RWC financial model generates revenues that are entirely reinvested and distributed by the board across the 117 member unions during the four-year cycle between tournaments to increase competitiveness and advance the strategic goal of implementing development plans in order that rugby can be a truly global sport.

The IRB spent £150m between 2009 and 2012, with approximately 50% of the revenues going to the tier-one nations.

For World Cup 2015, tournament organiser England Rugby 2015 needs to sell 2.9 million tickets to cover the £80m guarantee owed to the IRB for this year’s tournament. The 2007 tournament sold over 2.2 million tickets, with average attendance of almost 47,000 and capacity utilisation of 94%.

The 2015 target looks set to be achieved due to the phenomenal demand for tickets. In the region of 950,000 tickets were sold last September, while another 340,000 tickets were sold by England Rugby 2015 to fans through rugby clubs in England and Wales. 

Alex Miller, journalist